Burgeoning demand for flavours from Chinese food manufacturers has led to rapid growth in the last decade and encouraged more foreign firms to set up operations there, says Leatherhead.
China’s economy has grown apace in the last few decades, and the food and drink sector has seen a boom in output – with 150 per cent growth between 2004 and 2008. Especially in the urban hubs where many have more disposable incomes, there has been a general shift in shopping habits towards Western style foods bought in grocery stores rather than markets.
In 2000 production of flavours, flavourings and fragrances was almost 145,000 tonnes – but by 2008 it had more than doubled to 300,000, a new report from UK-based Leatherhead Food Research has found.
The Asia Pacific region is said to account for 17 per cent of the global demand for flavours, and domestic demand in China has been a driver for expansion. Leatherhead estimates that between 90,000 and 100,000 tonnes of China’s production is used by its own domestic industry.
However the growth and the potential have attracted a number of flavour houses to set up production in China. While leaders Givaudan and IFF have had local presence for a while, they have been joined by Firmenich and smaller Western firms like Treatt, Ungerer and Comax.
Being close to the market is especially important for flavour firms, as local tastes can vary wildly between geographies and companies need to understand the subtle variations in a population’s flavour preferences.
In the last decade China has overtaken Indonesia as the leader in production of monosodium glutamate (MSG), a flavour enhancer. It now accounts for 60 per cent of the world’s monosodium glutamate supply (1.9m tonnes), Leatherhead says.
Although much of this is for domestic use, domestic demand has stagnated recently. Chinese MSG now accounts for around 40 per cent of the MSG sold in Europe, despite importers being slapped with tough anti-dumping tariffs in 2008 following a complaint by Ajinomoto, the only MSG maker with a base in the EU.
Leatherhead’s researchers note some consolidation in the Chinese MSG landscape however. Some of the smaller suppliers have folded because of higher raw material costs and falling profitability. A clutch of larger suppliers, such as Henan Lotus, Hebei Meihua and Shandong Qilu, and Shandong Linghua are now said to dominate.
General ingredients growth
Leatherhead’s analysis of the Chinese ingredient sector is included in a new report called China – a growing global power in food supply.
Leatherhead estimates that China was producing in the region of 2 million tonnes of food ingredients a year in 2000, excluding commodities like sugar and starch. Today that volume has swelled to up to 5 million tonnes, representing some 15 per cent of the global ingredients trade.